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Revolutionary Rental Report: Proprietary Insight

AED members have exclusive access to reports containing proprietary benchmarking data on the heavy equipment rental business. As a companion to the 2020 Cost of Doing Business Report, the Rental Report provides a thorough analysis of rental practices. Combined with the supplemental white paper, which presents an interpretation of the data and statistics, these documents offer insight into a crucial segment of the equipment business.

“There was a void,” observes Richard Stewart, the independent consultant who conducted the research, compiled and analyzed the data, and wrote the report and the white paper. “The cost report is superficial on rentals. There was no granular benchmarking data available on rental equipment. The industry never had [an examination of] management practices on rental equipment. There has been little guidance, no benchmarking data for rentals.”

AED set out to change that.
 
Genesis of an overdue idea
Stewart credits Jason Blake, The AED Foundation’s executive vice president and COO, and Brian McGuire, AED president and CEO, for coming up with the concept about a year ago. Relying on Stewart, a former CPA and independent consultant, and Industry Insights Inc., an independent professional research and consulting firm that specializes in conducting financial surveys, compensation studies, market assessments, and other forms of customized research, AED launched a 12-month investigative endeavor.

It started with several volunteer distributors that provided enough data to see trends emerge, allowing Stewart to convert standard practices into best practices and validate them. He made three-day visits to each of the distributors, beginning in June 2019, meeting with top-level executives to review and map three components: 
- Strategy, selection and assessment
- Their process to elect business models
- How each company is run operationally

Based on that information, Stewart built a composite report – a representation of standard practices – that he used to prepare a confidential survey later completed by AED distributors in mid-2020. The survey collected financial data, information about management practices, and operational data at a granular level – something never done before in the rental market.

Value
The surveys, analysis and reports were treated as an academic research project, Stewart says. “It was a double-blind examination. I’m the only person who knows who the original participants are; even AED doesn’t know who participated. Just like I don’t know who the participants are. Only Industry Insights knows that.” That kind of objectivity lends credibility, he believes.

But it’s the information collected that is manifestly useful. “The data addresses a value proposition by providing benchmarking,” Stewart states. The benchmarks are content-specific, he notes.

Segmented by categories such as horsepower, geography (based on climate), company size, sales volume – with a select group for “high-profit” dealers – and line of business, the report is directed to dealer executives and is intended to allow benchmarking on rentals with proprietary data collected methodically. The report is reliable, relevant, and representative.

This extensive and unique report allows dealers a basis for comparison. “There are levels of benchmarking,” Stewart explains. “They can compare themselves to themselves, to their peers and to non-peers who are the best in the world.” This report is at level 2, he says.

Through the collection of granular data, Stewart says the report allows members to “understand the business at a level never seen before” and identify variations from the norm. It invites examination and discussion. “It calls out opportunities to improve.”

Reasons to Participate Next Year
Stewart says it was easy to find volunteers willing to let him look into their business processes. “AED called; they lined up,” he summarizes, adding that their eagerness indicates the interest level in this information, as well as the level of trust AED, has instituted with its members that they are willing to divulge highly confidential information for the greater good.

Stewart hopes the same enthusiasm level is present next year because widespread participation creates a more representative sample. “Multiyear charts are highly reliable because different dealers respond,” he adds.

The original dealers got a confidential report on their business for their role, and they’ll get both reports and the white paper for free. The survey respondents also receive the two companion reports and the white paper free of charge.

Reasons to Purchase the Report
The two documents are sourced from AED members for AED members. This information is proprietary and is not obtainable from any other source. The white paper provides an outside perspective on the data: objective interpretation and recommended actions. Together, these documents provide vital insight into the rental business.

And they do more. “The information has never before been examined in this way,” Stewart explains. Always before, performance measurements looked in the rearview mirror; this management perspective looks forward. “We have never seen prospective benchmarking.”

Not only is benchmarking a good reflection of a company’s progress, but Stewart says benchmarking tools can be used as coaching tools for future leaders. This information teaches them how to examine financial results, management processes such as budgeting and planning, and business practices.

Rentals are a strategic line for distributors. They’re more critical strategically now than ever, Stewart contends. “There’s no debate about the strategic importance of rentals. It’s compelling.”

Stewart references Graphs 1 and 2 in the report, which show an 8-year trend in rentals. The trend indicates a “tectonic shift in customer behavior” that began in 2012, he says. At that time, every $1 in rental was matched by $6 in whole goods sales. By 2019, the difference diminished significantly: for every $1 in rental; there was only $2 in whole goods sales.

As the economy changed, there was a transfer of risk and ownership back to the dealer. “Whole goods sales are a transactional business,” Stewart says. “Rentals is a process business. The more robust the roles, systems and processes are, the more profit you make.” Graphs 9 and 10 and especially 11 and 12, highlight the necessity of roles.

The timing is ideal, Stewart believes. In July, the report came out with the white paper following in October – the time of year when most dealers are planning for 2021. 

But by timing, he also means the current economic situation. “Is the report relevant, given COVID-19?” he ponders. “In the short term: probably. In the long term: definitely.” Uncertainty is a good time to evaluate the business. 

“During uncertainty is the best time to look for business improvements – the right time to make changes.”
Stewart says change occurs due to challenging times and a compelling vision: one without the other is not sufficient for promoting growth. With a global pandemic and a struggling economy, there’s no doubt about difficult times. Stewart believes the reports offer a compelling vision.

To help gauge his claim, success measures will include the number of purchases of the reports, registration for presentations and webinars based on the reports, the number of participants next year, and long-term dealer success. If, as he suspects, the reports are beneficial, he anticipates future analysis of additional lines of business at dealerships, such as parts.

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